Risk & Suitability
Qualified investors participate in investments via Algodon Partners’ wholly-owned registered broker-dealer, DPEC Capital, a FINRA member firm. For every DPEC Capital client, two very important considerations must be addressed before proceeding with any investment in private equity: investment risk and suitability.
Investment Risk. There are numerous risks associated with any investment in private equity. For example, an investment in private equity is an illiquid investment. This means that your money will be tied up for an unspecified and/or indefinite period of time. This of course is very different from an investment in public equity (i.e., in the stock market) where you can generally buy or sell your stock (at current market prices) almost every business day. Another key risk associated with private equity relates to the fact that such investments are often made in new or start-up companies. Such ventures are inherently risky and a high percentage will fail. While such investments offer the potential for significant returns, this potential does not eliminate or even reduce the magnitude of the potential loss.
Accordingly, you should not consider investing in private equity unless you have substantial income or net worth, have no need for liquidity with respect to the investment, and can bear the risk of a complete loss. Because there are other risks associated with any specific private equity investment, the offering documents relating to any such investment (such as a private placement memorandum supplied to you by DPEC Capital) should be carefully read and completely understood before making any investment.
Suitability. Before a DPEC Capital registered representative will recommend that you make a private equity investment, he or she will need to know and analyze certain information about you in order to determine whether such an investment would be suitable for you. Some of the factors that are considered are:
- The investor’s age
- Total and liquid net worth and level of annual income
- Investment objectives
- Investment experience and investment sophistication
These are only some of the qualifications for suitability determination. A registered representative from our firm will contact you to discuss your suitability for this type of investment.
If these facts lead your DPEC Capital registered representative to conclude that an investment in private equity is suitable for you, only then would any private equity recommendation be made.
Even if you are prepared to accept the risks of making an investment in private equity, and even if your registered representative believes that recommending such an investment would be suitable for you, you must still qualify as an accredited investor. If you have any questions regarding the risks of investing in private equity, or whether such investing is suitable for you, or whether you qualify as an accredited investor, please feel free to contact us.